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Thursday, February 16, 2012

SPX Update: Apple's Intraday Reversal May Be a Signal for the Broad Market

The charts are a mess tonight. While the big picture view has shifted somewhat over the past month, my daily short-term preferred counts have been on an exceptional win streak since the end of January -- catching the lion's share of the rally since 1307, and a good number of the turns. But tonight I've looked at the wave structures across markets, and really feel like the market's quite undecided, and could go either way right here.

I'm leaning toward the idea that there will be more downside in store for this market over the short term, but my confidence is only marginal. However, I've found a pattern in the New York Composite Index (NYA) which has nice clearly-defined breakdown or breakout levels -- so we can simply wait for the market to tell us what it wants to do next.

The first chart I'm going to share is the bigger view of the NYA, annotated with the interpretation I'm leaning toward. The second chart is short-term, and annotated with the clear breakout/breakdown levels.

This next chart shows the clear levels to watch. But before the chart, this next little bit of discussion is geared toward novice traders: a breakout or breakdown through a key level by no means guarantees that the market will follow through. The key levels do, however, generally give you better odds of follow-through in the direction of the break -- and, more importantly, they give you levels to work from to determine stops and entries.

Usually when the market breaks a key level, it will return to that zone to back-test it. That back-test is usually considered the "safer" entry point. If the market is unable to penetrate back through the key level, the trade is usually good. However, it's always important to be on guard for whipsaws; so if the market breaks-out/breaks-down but then returns to that point and penetrates significantly back through the break point, it's likely you're in the process of getting whipsawed -- and it's usually advisable to close out and wait for another trade, or stop and reverse to the opposite trade. Otherwise you risk turning a minor loss into something more substantial, because whipsaws are often followed by strong moves in the new direction.

Anyway, the chart below isn't as detailed as the first chart, but indicates the levels to watch. Aggressive traders could play off the trendlines, and then use the key levels noted as further confirmation of direction.

The next chart is the S&P 500. The fifth wave up may have completed yesterday, though I'm not crazy about the structure. Also, the labeling on this chart doesn't match the NYA preferred count. After studying the NYA, I'm more inclined to think that no matter what happens today, there's still another leg up coming after any correction. I will solidify, or adjust, this chart after the market gives a bit more info. In a more normal market, I would be convinced a decline was due right now -- but this market has certainly fooled us all a number of times already.

If 1335 doesn't hold as support, there's a bit of an air pocket down to 1321.

Yesterday, Apple had its first bad day in a while. It gapped up and then reversed strongly on heavy volume, thus at least temporarily thwarting investors' plans to drive Apple's valuation so high that it becomes worth more than everything else on the planet combined.

There've been 3 other times in the past 15 years that Apple has rallied at least 2% to a new 52-week high, then reversed intraday to close down at least 2%. Each time, the SPX declined at least -6.8% at some point during the following month. Two of the dates were 7/9/98 and 8/19/98 -- the third was 10/11/07, and is shown on the chart below. (Statistical data courtesy of SentimenTrader.com)

So that's about all the news that's fit to print. In conclusion, the short-term charts appear a bit hazy, so it's best to let the market dictate what it wants to do next, by paying attention to the key levels outlined. The uptrend is still technically intact, though the market is now showing some signs that it may be getting ready for a more significant correction, and the historical data shows that Apple's behavior yesterday is yet another warning sign that this rally may finally be getting tired. Trade safe.

No, EWs with GANN analysis to back check. Also TLs. And some MA levels thrown in too. I run them all on my charts, as said they look like a spaghetti dinner.This call is ONLY based on GLD breaking through that level I mentioned, no break and this call for ZSL gets dumped.

Since there was some discussion of this on the other thread, I just want to remind those who haven't already done so that if they feel they're not in a position to donate to help support my work, they can actually show support without taking any money out of their pockets, by signing up for accounts with TradeKing and Zecco, which is 100% FREE.

Accounts only need to be opened, they do *not* need to be funded. It's quick and painless and *free*, and it's the equivalent of sending in a small donation.

Thanks again to those who have already shown their appreciation and continue to do so. :)

This is the opening 30 minutes, guys. IMO, this is retail buying on dip versus pros exiting at gap resistance. The pros are holding the line. Once the retail is done, then a drop back to what would be the 5th test of support at 1335 ES.

Many thanks to SpikerJ for his 2nd donation! Very much appreciated, thank you. :)

(Spiker, I'm having trouble w/ Paypal's tracking system, so I scanned through previous dontions by eye -- my apologies if it was your 3rd or anything. I'll have to check again when their system's working.)

"...my daily short-term preferred counts have been on an exceptional win streak since the end of January...." and what about your prediction that the market would top out at about 1333. I follow you and respect you as a good elliot wave technician, but your short term predictions, like most EWT short term predictions from everybody else, are no better than a coin flip.

TVIX is very unpredictable, its intraday movement can be $2, but recently it is making higher lows and higher highs. look at today the market is up and it is up too. The volume on this thing has been incredible. If the market drops today or tomorrow, you shoul be looking at at least 24, the low will be around 18. Just my 2 cents, other fellow TVIX fans please chime in...

They have to have something to talk about between commercials :) If they can just keep us occupied on Greece then we all feel good about ourselves. Kinda like a bunch of crack heads badmouthing the meth heads. :#

Hi PL! Quick question: On your first chart of the NYA you drew a small line to the upside before the turning down for the next couple of days... I'm sure you didn't do that by chance. Since you already nailed it, since we do have an upside movement early today, do you have a reason to expect a turn in direction intraday and a lower EOD?

guys & gals (where is Furrrr?),this is gonna take until abut 1 to 2 pm to sort itself out. there is nothing to be gained by trading today imo. the drops will suck in the bears, then it will turn around and sucker the bulls.

Since I'm assuming it's a triangle, it needed one more wave to the upside to be complete the EWT pattern, even if it' to head down later. Of course, if it turns out it's the 4th wave triangle as discussed, it will hold the 7964 level and rally from here.

The b-wave triangle would reverse lower. I'm simply unable to determine which it is at this point -- hence the key levels outlined. :)

a gap open this morning on TVIX w a little head n shoulders today. Little Inverse Head n shoulders on XIV , also w a gap open. i'm playing both today for something new. im waiting for 19.10 buy TVIX. Anyone else play gaps?

Yes, i believe TVIX will hit 30 and beyond in your time frame. The issue you will have for 5 months is you may have to update your sell orders after 30 days or 3 months or whatever your accounts allow to keep a standing sell order open. This is not for the thin skinned as you can see the real drastic moves in both directions. tight stop losses get taken out.

I don't think it will be as pronounced the second time, but it will not go unnoticed by the market, that much seems certain. Barring some monster outside catastrophe, in which case it will go into bonds.

In December, it was a surprise. The February 29th date is known by everyone. I would expect a run up ahead of the announcement. Once the announcement is made, we may get an additional pop up that last 0 to 3 days before the market heads down into a profit taking correction. If the amount of the 2nd LTRO disappoints, it could be down into correction immediately.

here are the levels, based off of the 120 ES chart. put a fib retrace on it and you will see how I got them.NEW ~ T ~ LEVELST1 = 1345.75 fib 50% [HIT IT]down to T2 at ~ 42 [I will get out when I feel it is done and may not be available to blog it]up to 61.8% T3 at 1348.50 [thsi last one is to TBD relative to how the T2 is played out]

The market appears to have priced in the same amount for LTRO#2. A smaller amount will most likely disappoint; Too high an amount may signify something is wrong with the banking system. So it needs to be just right to boost the market higher.

Say, did anyone else see that bit on The Slog today (http://hat4uk.wordpress.com/) that talks about the Greek default docs (courtesy of D.C. and Berlin) detailing the timeline for the Greek default, say on Mar. 23rd? And here we thought the Greek situation could go either way...

One the the market is going to struggle with is: Is the improving economic data bullish or bearish for stocks. It's Bearish. Continued improvement will mean: Anti-Business President stays in office, inflation will creep in and interest rates will start heading up sooner than Fedspeak, there will be no QE anything which kept the market afloat since 2009. Despite these improvements, toss out Apple and earnings have been mediocre. All of the above, along with spiking oil (gas) is going to mean the markets are going to have to get used to standing on their own two feet

The last paragraph is the most telling. My theory about the LTRO funds being deposited with the ECB as a ready-cash doomsday backstop may be supported by this...a pre-positioned bailout for the big European banks...only time will tell.

Here comes the bridge loan - Greece will not get all bailout funds prior to April elections: In that scenario, the euro area would arrange a bridge loan to get Greece past the March payment, the official said.

had fib level 52.50 and didnt short it.....should have been long all the way up!.....maybe this is high for day and we move lower for the rest of day......if we dont break yesterday high this would be a test of high and fail?

Astro $.02 - since there was a question - we're in a reversal zone, at least ST (Venus sq Pluto yesterday) - however, that may only fit with the IV count illustrated by PL. From an astro perspective, it is completely feasible that we continue up into March due to all that expansive Jupiter energy still to resolve.

What I'm watching is the Sun conj Neptune on 2/19 - which just happens to correspond to more supposed Greek deadlines, etc and the scheduled finance ministers meeting on 2/20. By itself, this astro signature is not predictable of market direction - you will see it marked as a black line on both charts.

That said, as far as financial astrology goes - Neptune represents the irrational, the rumor - the illusion. In contact with certain other planets it is often around for the irrational "panic" buying or selling.

The first chart is a repeat from yesterday, the second illustrates some points from the market in 2000. The 2000 run-up prior to the top was a Jupiter (expansive) sq Neptune (irrational) push.

Great site. This is my first post but been lurking for a while. Donation sent.

I was looking at your SSI (super secret indicator) and noticed that it nailed the top in RUT in 2007. The Dow made a new high, but RUT did not. I wonder if we'll have the same situation here. Do you have the data to go back further with your indicator?

Not picking on you - Pisces are great concept people - ideas from nowhere - a unique ability to see linkages and big pictures - that's why they're not paying attention to the lightbulb, they don't need it to "see."

I know you're just kidding :) We are indeed great concept people...but we always move on to the next great concept without finishing the prior one. I says to myself, "Self, I already know I could finish up this project, so why actually finish it...Neeeext."...ugh.

aaarrggghhh, can we please break out of this 1340-1355 range??? I don't care if it's up or down, but this drives me N U T S. I've been 100% cash since last wednesday when I closed my longs at 1350... Lost count of if we just finished wave 4 or if this is iii of 5, iv of 5? PL, need your help. Can't trade 1-day up, next-day down like we've seen for a week. I guess that cash is thus the safest position for me for now.

You are correct. That might have been the best entry point but with accumulated gaps on so many indicies who gets filled first. TVIX or you pick the index? I do think vol will pick up though imo. Just getting my feet wet on a small position. Thanks for the correct obsevation. I appreciate it.

506.46 is the 50% retrace of the down move from yesterday's high to this morning's low. The 50% retrace is usually an important battle ground point for bulls and bears. Above means up and failure means down. Of course it could fail the first time (which it usually does), but then turn back up later or tomorrow and head back above the 50% level.

I agree it's overbought, but as it just stays here, it's working off overbought condition as a fct of time instead of price. But I could definitely be wrong, often am. But I don't want to stick around until last 1/2 hour and have to close out then if it's still sitting here. Probably overly cautious on my part.

Been reading some articles on the Slog, that was referenced earlier today. Found bits of this article interesting:

"But it’s the Chinese enigma that too many people are ignoring. Asian shipping shares aren’t doing well at the moment, and most of the indices measuring economic futures are at or near the red-flashing-light point. The equation here is remarkably simple: China exports to the West, West’s ability to consume spirals down the loo, China hits the ground hurting. China stops ordering raw materials, Australia goes into a rapid and deep recession, and the Sydney property bubble bursts. China cuts imports and tries to focus on the home market to take up the slack. Western exports fall further, and depression becomes slump"

This line was pretty funny, in describing his home economy:

"This is indeed what makes Britain a special case – as in a special Basket Case – among the EU’s larger players: the French have their farming to fall back on, and the Germans their engineering. We have a bunch of lunatics buying and selling worthless shreds of paper."

fwiw - the moon is currently in the more optimistic sign of Sagittarius today - the "sagittarius factor" allows for a certain amount of hope, optimism and blind faith - those trading futures may want to see what happens when the moon moves into the Capricorn "reality" tonight/tomorrow at 12:04 am EDT.

All major indexes rose on lower volume today than during yesterday's drop. AAPL could not retake the 50% retrace of its down move from yesterday's high to today's low (it didn't even get close). The market is primed for a gap down on any bad news, but I would not make any specific bets on when or why it will.

Hi folks. I just wanted to tell you about an incredible article I found last week. I honestly can't remember if I posted the link here or not. If I've already done so, then please accept my apologies. But I just re-read it and it's just so amazingly good. It's written by Charles Hugh Smith and the topic is "fractals within the social network". http://econintersect.com/b2evolution/blog2.php/2012/02/12/social-fractals-and-the-corruption-of-america

This is what I see for today from an EW perspective - discussion welcome, 'cause I'm not PL - just trying to help.It looks like the v is not complete at this time and may move into PL's target zone 1358-1365 if an ending diagonal.If this is only 1 of 5, there will be a greater move higher after a 2 correction tomorrow.

This is one of the few times I have held a short position overnight. A minor position, but this seems an easy call. I shorted the close at 1,358 and will hold this over the weekend if it becomes necessary.

This move started at 1,341 and has had only TWO retrace waves of two points the ENTIRE way. Which was from 1,349 to 1,347. And then at the top from 1,358 down to 1,356 tracing out a two point range for the last three hours of trading.

And that the SPX traced out the last THREE hours holding a two and a half point range is extremely telling as well.

It's quite apparent that it was ALL about destroying short positions and probably destroying tomorrow's 136 strike put as retail bears simply do not have the resources to hold through a move like this or average this one down on the way up. And they were given no retrace waves from which to jettison their positions.

Last time something like this happened was last Tuesday and into Wednesday: There was a twelve point uninterrupted move up from 1,337 to 1,349, which destroyed anyone who was on the wrong side of it. There was then another three points of bouncing around for the rest of the day on Tuesday and into Wednesday morning that finally ended at 1,353 the next day and printed another incremental new high.

So it was a sixteen point move in toto. And never a retrace of more than two and a half points the entire way. A total shorts destroying affair that gave them no quarter.

That was ALSO followed an eight point waterfall by mid-morning of Wednesday back to 1,342 as the market's symmetry and math finally came back into play. Which it ALWAYS does.

Moves like this have their retrace waves. Eventually. And usually only AFTER the move has exceeded what retail participants can withstand. And after they have given up hope.

At seventeen points into this move that has kept the fifteen minute Williams and Stochastics chart pegged to their upper ranges the entire day and which reached another newly printed high, I'd be very surprised if are three to five more points to the upside can be gotten out of this one before a meaningful correction happens.

Good observation. Makes total sense, since it is opex tomorrow, now that the puts are woryhless, what about the calls? Wouldnt the market makers want to make them worthless too if they havent sold yet yesterday?

GREAT analysis! I will go short tomorrow ASAP. Thank you much. From a channel perspective, I thought this was unplayable, as of today's close. Yesterday at the close (I can only do RTH) it was at the bottom of the channel. Today at the close it's in the middle.

Had a meeting from 2:45 to 5:45. Here is what I said early on "dollar dropped like a stone pulling fear vixes with it, ES above my 61.8%, this will take some time." I just get the feeling this was the last gasp, that this finalized the up move. I guess we will see tomorrow, BUT it will all based on the dollar; it goes up and mrkt will move down. Vixes did not go back down to their borttoms.ing fear vixes with it, ES above my 61.8% this will take some time. "Hre is a

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